On the heels of New York and Missouri legalizing adult use cannabis, on November 7, 2023, Ohio voters approved “Issue 2” – a citizen initiative paving the way for adult use marijuana legalization in the state, which according to voter ballots creates “a system that regulates and taxes marijuana just like alcohol”. While the law goes into effect on December 7th, lawmakers can modify the new law before it goes into effect, and of course Ohio’s newly created Division of Cannabis Control (within the Department of Commerce) will need to rulemake around the new law, which could throw some curveballs at enterprising adult use marijuana businesses.
The General Framework
The citizen-initiated statute legalizes the cultivation, manufacturing, testing and sale of marijuana to adults twenty-one years of age and older.
When the law takes effect, Ohioans will be able to legally possess up to 2.5 ounces of marijuana flower and up to 15 grams of marijuana extracts. Additionally, Ohioans will be able to grow up to 6 plants individually, or 12 plants cumulatively as a household where at least two adults reside, provided that certain conditions are met. For example, the stature requires that adult use marijuana may only be grown in “a secured closet, room, greenhouse, or other enclosed area” that is not visible from a public space.
Despite the law taking effect on December 7th of this year, adult use dispensary sales will not begin until the Division of Cannabis Control (the agency tasked with regulating, investigating, and penalizing adult use operators) finalizes regulations on licensing product standards, packaging, and more. The Division of Cannabis Control has nine months to finalize these adult use regulations and issue the first round of adult use licenses.
Once adult use dispensary sales begin, marijuana sales will be taxed at 10% on top of existing state and county sales taxes. All monies collected from this 10% tax will be deposited into an adult use tax fund for the benefit of the following causes:
- The Social equity and Jobs Program,
- Municipalities allowing for adult use dispensaries,
- Substance abuse funding, and
- Administrative costs of running the state’s marijuana program.
Issue 2 does not impact existing rules regarding whether marijuana can be used on-the-job or tested for as a condition to employment. Additionally, Ohio marijuana legalization does not change the laws surrounding where individuals can consume marijuana. Use of marijuana in public areas will be treated as a minor misdemeanor.
The Details of Ohio Marijuana Legalization
Ohio marijuana legalization allows for the following types of adult use marijuana to be sold: plant material and seeds, live plants, clones, extracts, drops, lozenges, oils, tinctures, edibles, patches, smoking or combustible product, vaporization of product, beverages, pills, capsules, suppositories, oral pouches, oral strips, oral and topical sprays, salves, lotions or similar cosmetic products, and inhalers.
With a few exceptions, no adult use marijuana business operator or testing laboratory can be located within five hundred feet of the end boundaries of a prohibited facility, which means any church, public library, public playground, public park, or school.
The initial batch of licenses are expected to be awarded by August of 2024. The Division of Cannabis Control can initially issue up to 40 level III cultivation licenses (cultivation areas doesn’t exceed 5,000 square feet and up to 50 dispensary licenses. 24 months after this initial issuance, the Division of Cannabis Control will evaluate the number of adult use licenses and may authorize additional licenses if there’s demand, supply warrants it, and there’s a need for increased access geographically.
There are some quasi-tied house rules in Ohio, too. No person can own or have control of more than one level III cultivation license, and no cultivator of any size or processor can have any ownership or control in a level III cultivator. Further, no person can have: more than eight adult use dispensary licenses; more than one adult use cultivator license, and more than one adult use processor license at any time. And no marijuana operator can have an ownership or financial interest in (or any employee sharing with) a testing lab and vice versa, which is a common restriction in all states. Notably, there’s no stand-alone distribution license in Ohio. Looks like the licensees will be able to self-distribute, which is a break from the alcohol model.
Social Equity Applicants and existing medical marijuana license holders will have priority over other applicants. Social Equity Applicants will also be eligible for grants, loans, technical assistance, and reduced fees license and application fees.
Municipalities can decide to prohibit or limit the number of adult use licenses in their respective territory. However, if an existing medical marijuana dispensary exists in the municipality, voters can petition for a ballot measure approving the opening of adult-use dispensaries.
Finally, the newly passed statute delegates rulemaking authority to the Division of Cannabis Control for overall THC limits in products, but also states that “for plant material[,] the [THC] content limit shall be no less than thirty-five per cent and for extracts the content limit shall be no less than ninety percent”.
Final Rules Around Ohio Marijuana Legalization
Despite the passing of Issue 2, many important issues are yet to be decided, such as which businesses will be licensed, whether there will be any residency requirements for ownership, owner and financial interest holder thresholds, whether licenses can be bought and sold, quality assurance standards and prohibited product types, how delivery and online/mobile ordering will take shape, and which local municipalities will allow for adult-use operations. In turn, there may still be changes to come, as Ohio lawmakers have until December 7th to modify the law, and not all changes may be industry friendly.
In a statement via text to the Associated Press, Republican Ohio Senate President Matt Huffman expressed skepticism about the voter-approved initiative, claiming the law passed was “written by the marijuana industry and should not be treated as a cash grab for their cash crop at the expense of a state trying to emerge from the opioid epidemic.” While he noted specifically that THC limits contain “questionable language,” it is unclear what other changes he and other legislators may attempt to effectuate over the next month.
Husch Blackwell’s Cannabis team has the experience to assist companies in navigating the complex and evolving federal legal landscape surrounding the cannabis industry. Contact Hilary Bricken, Megan Beebe, or your Husch Blackwell attorney.